Monday Open Thread...
Posted by Prof. Goose on February 20, 2006 - 3:12am
For your threading pleasure...
You may also want to check out this interview with Richard Heinberg and JH Kunstler with Jim Puplava over at FinancialSense (it's about an hour). I found it to be a good "primer interview" that you can send to people who might be inclined to listen. (Plus, there's a pretty cool plug in there regarding TOD by Heinberg about ten minutes (47 mins in) from the end. Thanks for that, Richard.)
An interview with William Clark, author of "Petrodollar Warfare" on NZ National Radio's "Nine to noon" programme:
[http://www.radionz.co.nz/audio/national/ntn/oil_dollars]
I realise this will probably make Jack groan, but there are some interesting things William has to say about the history petro-dollars and petro-euros.
Peak Oil is mentioned and the interview ends on a rather bleak note.
No one will be surprised to hear that I do not agree with his assertions here or elsewhere. Broadly he combines speculation with some basic economic misunderstandings that create story that sounds plausible. Note: my comments refer only to the IOB and dollar pricing of oil. These are not comments on the ongoing strength of the dollar or US economy, war with Iran, war with Iraq, US foreign policy, etc. I see these as entirely separate issues and mixing them only confuses things and gets people upset.
Clark purports that the Iran Oil Bourse, and more broadly trading oil in dollars, is the main threat to dollar hegemony. As documented clearly here and elsewhere the primary strength of the dollar lies in the long term holding of dollar assets, which countries do voluntarily - not by its use in transactions. In any mainstream economic discussion this point is not disputed.
As I have said before, a country that does not want to hold dollars can buy them moments before they make the transaction. This does involve holding some foreign exchange, but it can be Euros.
Clark also holds a few major misunderstandings of macroeconomics. Fundamentally, he seems to not understand what a price is and can't clearly explain how countries would actually switch to the Euro. More importantly, the majority of what he fears will happen actually already does.
First, oil can only be priced in one currency, although this price can reflect the value of the basket of currencies that it is traded in. Oil could be quoted in any currency you want, but this would only be a translation of the dollar price. Obviously of the price is different in different currencies, buyers will just trade in the cheapest currency.
Currently oil's price reflects its underlying value based on supply and demand. If that price were stated in dollars and translated into Euros or the other way around, the numbers would be the same. If Chinese demand causes the oil price to go up 10% and everything else stays the same, everyone bears the same price impact. The US, Europe and China all pay 10% more for oil.
Secondly, it is not true that the US faces no currency risk (and others do) because of the dollar price. As Econbrowser (see link below) noted, the price of oil already follows the basket of currencies in which it is traded in. It does not correlate to the dollar.
Clark claims that the Iraqi economy boomed and the Euro value jumped once that country switched currencies. If this is the case, one must assume that Euro countries and Russia are voluntarily accepting a massive tax on their economies to subsidize the US. Still the only reference Clark could cite from Russia was a response to a question put to Putin in 2003. I think it is odd that if this issue were really this important, it would not be met by such silence on behalf of two potential beneficiaries.
All of this gets no coverage by the MSM or mainstream economists (or Russia, or China, or the EU) not because there is any plot, but because they do not take it seriously. There are dozens (if not hundreds) of economists saying that the US economy is heading for recession and that the dollar will crash. But it is a small fringe group that claims the IOB has anything to do with it.
Luckily, this debate does not have to drone on endlessly. The question will be answered in one short month. Let's wait and see. My guess is that Iran will postpone again, because they like having a threat more than running an exchange that may or may not work, but won't trade non-Iranian oil and won't make any difference to anyone.
Here are two very good links. We have also had great discussions on this at TOD in the past.
Econbrowser: Strange ideas about the Iranian oil bourse
http://www.econbrowser.com/archives/2006/01/strange_ideas_a.html
Daily Kos (see comments)
http://www.dailykos.com/story/2005/12/27/115725/53
Very good insight. I liked the links too!
I view the IOB as a micro event, not a macro event.
I haven't made up my mind either way. I have serious doubts that the Iranian oil bourse will catch on, anyway, assuming it ever happens.
Clearly the US pressure on Iran is destabilizing and would make participating in the IOB more difficult. But this is not the only factor giving Iran massive credit risk. The IOB is a nonstarter as an international trading platform in any case. I think it is inaccurate to claim that the only - or main - reason why Saudi Arabia (for example) would not trade on the IOB is US pressure.
That's what it's all 'bout.
I think this at the heart of the IOB issue. People wish the dollar would weaken, know that there are reasons why it should, then assume that the IOB is the answer. I have agreed that there are risks facing the dollars and that it should weaken. But this doesn't make me beleive that the bourse is kryptonite.
You didn't say "Voodoo Economics" you said "Economics Voodoo Magic" which I liked a lot better. Voodoo economics usually refers to Reagan's supply side theories, which have absolutely nothing to do with what I have said. Calling any of it "Wishful thinking" is a case of seeing what you want to see. I have not said a single positive thing about the dollar and there is nothing in my claim that says it won't go up in smoke. I am happy to accept for the sake of the arguement that the dollar could crash and no longer be the global currency. What the IOB has to do with this is unclear.
I am trying to have a analysis-based discussion on the IOB and the fact that everyone wants to insult me and change the subject certainly hasn't made me doubt that I am right.
Your third point above is the most significant. But again the important issue is holding US dollar assets long-term, which is still being done. Nothing that you have said provides any evidence that the US of the dollar as a measuring stick underpins the empire.
Personally I don't want anything like that. I'm simply trying to reject the opposite type of wishful thinking that has supported our bubbling economy through the years and is driving the risks to the skies. My opinion is that we should try to attempt soft landing before it is too late.
I am trying to have a analysis-based discussion on the IOB and the fact that everyone wants to insult me and change the subject certainly hasn't made me doubt that I am right.
I don't see an insult here, neither change of the subject. Pumping up an economy without exports and a disappearing industrial base like there is no tomorrow has lots to do with wishful thinking and little to do with economic fundamentals.
But again the important issue is holding US dollar assets long-term, which is still being done.
And so what? If things start unwinding whether you hold a one year or 30-year asset is all the same - you still have a hot potato you will try to pass on to the next dummy.
I think you missed the main point of number 3). The value of the dollar is based on perceptions. IOB might take a minor share of the dollar trade. But the risks that it would change the perceptions of the major players are enormous. The scenarious that can develop vary but the least that can happen is that FED will be forced to raise more aggressively interest rates to pay for the rising risk premium the dollar will be charged with. We may need to pay with a forced recession, and with debt levels to unprecedented heights this could get very ugly.
I think I will not exaggerate if I say that if significant portion of the world trade switches to euro this would mean the end of the independant monetary policy of US. For all practical purposes this would be equivelent to the end of the US empire.
You are correct that unemployment increases any time growth in real GDP declines below about 3.5% for any substantial length of time. The main justification for economic growth is that it is necessary to keep the rate of unemployment down.
The problems of coming to grips with a steady state economy have not been worked out even in theory, much less in practice.
On the other hand, bearing in mind the overexposed external position of the US economy, I can't see some mild scenario of 10% inflation and moderate unemployment... it will probably be either or. My best case scenario would be a moderate recession and a gradual reduction of the debt in the next decade or two.
I do think you are changing, or at least avoiding, the subject. I have acknowledged every economic point that you make in your post, except the last one.
I do not accept the point that there is much causality between the currency that countries trade in and the currency that they hold assets in. I suspect the most likely case is that the world continues to trade in dollars, but that there is a reversal of the desire to hold dollar assets. So my scenario is as pessimistic as yours. I'm just not buying into the party line that dollar trade underpins US strength and that the IOB is the weak link.
I see the IOB myth as a Star Wars fantasy. People want to believe that the US is the Deathstar, but that it has a fatal flaw that can easily bring it all down. I don't see it this way.
My point was that I keep saying that the dollar and US economy may have serious problems, but that the IOB is not one of them. The most common reply is to attack the first half of the sentence, where I have already agreed with you.
If you were to separate out all of the rebuttals to my IOB arguments that really refer to the IOB (not rebutting things I have accepted) I think you would find that they are brief, petty and unsubstantiated.
Your claim of battling wishful thinking is again attacking a windmill that doesn't belong to me.
This is a very disputable point at the least. I would compare it to the idea that there is no connection between voltage and the electrical current. Yeap, there are other factors like resistance, self-induction etc. but trade is the reason why foreign funds get accumulated at the first place and a claim that there is "not much causality" is... let's say strange. If we assume that there is no causality then we will need to explain why the funds held internationally in New Zealand, Canadian or Australian dollars for example are such miniscule amount compared to US dollars or Euro. The connection between trade and funds for different economic agents varies, but I would rank it this way:
You are right about the area of our disagreement, but none of your follow up points do much to advance your view. Of course countries need to hold foreign exchange if they want to trade. But is doesn't have to be dollars unless they trade with the US. Even so, they can convert at the time of purchase. International currency markets are the largest, most efficient, and most liquid market in the world.
Again, the real issue is the currency in which long-term assets are held. Why does China hold 70% of their reserves in US dollars? You seem to think it is because they have received them and find it too difficult to convert other currencies. This is wrong. I don't think anyone really believes that the currency balance held by banks in Korea, China, Japan, etc. is determined by what they receive in trade.
These countries have a strategic plan for their currency holdings based on return and exchange rate management. It makes no difference what currencies they receive through trade. They will convert and adjust to meet this strategy.
You say `trade is the reason why foreign funds get accumulated at the first place and a claim that there is "not much causality" is... let's say strange." This is also wrong. It is analogous to saying that you receive your income in one dollar bills so you keep your savings in one dollar bills. My claim above that countries determine the balance of their currency holdings based on return and exchange rate considerations is the undisputed mainstream view. The reason that countries such as China do not hold large amounts of New Zealand dollars in because that currency is regarded as riskier in capital markets, lacks the depth of the dollar and is not liquid. Just because you don't the like the fact doesn't make it untrue.
I think you have a fixation on US-centric, wishful thinkers, which is distorting your perceptions. If you leave that out of future posts they may make more sense.
And why is it not "liquid"? And why is it "risky"? Are New Zealand or Canada dangerous places to make business with? What can China buy with New Zealand dollars? Sheep?
I think at another place I pointed out that 60% of all international trade is being done in dollars. Countries trade in dollars that's why they prefer to keep dollars to buy what they want at any time without paying for the risks and the transaction costs. The less a currency is traded with, the more it is "risky" and the less "liquid" it is which is the another way of sayng that transaction costs are higher.
What you keep staring at is the secondary market where agents redistribute their foreign currency portfolio between themselves but the primary reason for them to have a portfolio at the first place was just one: trade. Money without anything you can buy it with is plain paper.
Sorry I don't have what else to say except that "international trade is the underlying reason for accumulation of foreign funds" was stolen from my books of International Finance. I'd like to see what yours say.
You are right that:
LevinK: I think what we do not agree upon comes down to (Jack's claim) here: "I do not accept the point that there is much causality between the currency that countries trade in and the currency that they hold assets in."
However, I think that our disagreement is part substantive and part semantic. So here is an attempt to clarify my meaning and some terminology:
These countries have a strategic plan for their currency holdings based on return and exchange rate management. It makes no difference what currencies they receive through trade. They will convert and adjust to meet this strategy."
These points by Professor Hamilton at Econbrowser (http://www.econbrowser.com/archives/2006/01/strange_ideas_a.html)
should provide ample evidence of this:
"you don't need to acquire any U.S. assets in order to purchase a barrel of oil that is priced in dollars."
"the key question in my mind is what asset do the oil producers want to be holding immediately after they've sold the oil? If what they want to hold is U.S. Treasury securities, then I agree with you, the transaction has led to an increase in the demand for dollar-denominated assets. However, if that is their desire, I see no reason why they wouldn't do exactly the same thing if the sale were transacted in euros, namely, use the euro proceeds to purchase dollars for the Treasuries. Nor, if what they ultimately want is euro-denominated assets, does anything prevent them under the current system from immediately converting the dollars into euros. This is why I suggest that it is the final demand for assets rather than the unit of account of the transaction that is of primary importance."
"I will grant you that somebody must hold some extra dollar-denominated assets during the time it takes to complete the transaction itself. However, I expect that the contribution this makes to the demand for U.S. base money (the sum of physical dollar bills plus Federal Reserve deposits) is unlikely to be very large, and certainly not something that could cause the end of an empire, as if the total seignorage the U.S. collects from all sources were all that huge in the first place. "
9. According to The Federal; Reserve Bank of San Francisco (http://www.frbsf.org/publications/economics/letter/2003/el2003-11.html), "Since the 1997-1998 Asian financial crises, monetary authorities in emerging markets in East Asia have more than doubled their stockpiles of foreign exchange reserves; by the end of May 2002, they held $845 billion, or 38% of the world total. Of these countries, China, Taiwan, Hong Kong, South Korea, and Singapore rank just behind Japan as the world's biggest holders of foreign exchange reserves--together those five countries hold reserves totaling nearly $700 billion." How do you see this doubling as linked to trade?
My Int'l Finance Textbook agrees with yours and states that "the dominance of the US dollar (as a FER) may be attributable to the fact that roughly half of world trade is invoiced in dollars. Most commodities are priced in dollars". I do have to acknowledge that international trade and dollar pricing does play a role in accumulation of the portion of short-term reserves that is attributed to making net payments to foreigners.
But my claim is that this is a small portion US dollar assets held by foreign countries. If this dollar dominance were to be eroded, the impact on the US would be somewhat negative. It is conceivable that the IOB could be a small factor in this happening. I have never disputed this.
My contention has always been that the threat from the IOB is microscopic in comparison to two other threats to the US economy and role of the dollar, both real:
1) Iranian Oil resources
2) Waning interest in holding long-term dollar denominated assets by foreign countries.
Given that there are real issues, I wonder at the amount of efforts committed to pumping up the IOB, which I see as a diversion at best. I maintain my position that the IOB scare is a conspiracy theory on steroids.
DEFINITIONS:
Foreign Exchange Reserves
Liquid assets held by a central bank or government of a country, for use in intervening in the foreign exchange market.
http://www.lse.co.uk/financeglossary.asp?searchTerm=foreign&iArticleID=1902&definition=forei gn_exchange_reserves
Wikipedia Foreign Exchange Reserves
Purpose
Reserves can be used by the country's central bank to purchase the country's currency in an intervention. This allows it to control the exchange rate; increasing demand for the country's currency increases its value as compared to the currencies of other nations. Countries often have reserves because they fear speculation and economic shocks might affect their exchange rates, and they want to be able to keep their rates steady.
http://en.wikipedia.org/wiki/Foreign_exchange_reserves
TEXTBOOK:
International Financial Management
Eun/Resnick
McGraw Hill
1) The central bank reserves are overwhelmingly accumulated by purchases from the domestic market. If country agents do not use dollars for trade, the banks will accumulate euros or whatever they use. If it stubbornly converts those euros to dollars it will have to continuosly go to the international market every time its residents sell or buy their euros.
China and Japan have USA as their most important trade partner, and the impact on their official reserves is evident.
2) Higher yelds attract investors but if a currency is considered risky the yield premium must be higher. Example: current USD/EUR IR differential is above 2% but the dollar has not appreciated significantly. The reason is that there is a risk premium payed by US government because the dollar is already considered risky.
How risky is a given currency is directly related with demand for it as a transaction currency. New Zealand dollars are not demanded by agents because you can not buy lots of things with them. A currency that is not used in the international trade is prone to huge fluctuations - if you buy lots of NZ dollars it will appreciate and then probably depreciate with time. Investors need security and therefore invest in funds that will be liquid and demanded in future.
What is the term structure if your portfolio is absolutely irrlevant to this discussion. China's national bank does not have to wait 30 years to cash its US bonds if its residents need US currency. Or if they start demanding euro it does not need to wait 30 years to restructure its assets.
3) Speculative gains funds are short-lived and are directly related to funds 1) and 2). Speculators continuously monitor where the major players (central and commercial banks) direct their funds and rush to follow them and profit from the currency appreciation/depreciation.
I searched for statistics to compare the portion of foreign assets in dollars in 1980 and 1997, but could not find any. I would bet though that it has gradually declined along with the portion of dollar in foreign trade.
I would sum it up:
Sorry for the long post, I hope I made my points clear.
However, it's axiomatic that in politics and international affairs perceptions are at least as important as reality. And in that regard, I suspect the rulers of the US are quite upset over the IOB, if for no other reason than that it exists at all and that it represents an extended middle finger in the face of the omnipotent US.
They are probably also worried about countries with a grudge against the US and the UK switching from New York and London to the IOB just out of spite. And it could set a precedent for countries avoiding the dollar in other types of transactions. So perhaps the IOB is just a secondary reason why the US has it in for Iran - its overt hostility towards Israel and its alleged nuclear weapons program being the primary ones.
If the dollar Euro exchange rate is one dollar to .8 Euros. What difference does it make if a unit of oil is priced at one dollar and translated into .8 Euros or priced at .8 Euros and translated to one dollar? It has to be in one currency for consistency. It could be Euros as well as dollars, but this is like claiming that using the metric system would bring down the empire. You can get over a wall just as easily whether you measure it in inches or millimeters.
Cars, oil, anything can be priced in Euros. But it wouldn't change anything. It is just a price. Likewise a race can be measured in miles but you would be foolish to say I can't run 16 kilometers, so I'll only go ten miles. The price is no different. Euros, dollars, miles, kilometers. None change the underlying reality. But you need to measure in one unit all the time.
You say that converting currency is an expensive step on the ladder that keeps bankers fat and happy. Look up the dollar-Euro spread some day. It is not expensive. And I claim that Euro is buying oil from Russia in Euros already. I don't believe they are converting to dollars. They only use the price as a measure to see how many Euros. I have made this claim before and it has not been refuted. If I am right it makes a mockery of the whole IOB claim.
When I say the majority of what he fears already happens, I refer to:
1) The US bearing currency risk: They already do as oil follows a basket of currencies and is not correlated to the dollar. The US bears the same risk as everyone else.
2) The idea that pricing oil in Euros requires the use of dollars is not really true. Countries can hold Euros, convert to dollars and buy oil. The seller can then convert to Euros if this is what they want to hold. If this was all done through one institution, the funds are in dollars for less than one second and in Euros for a long time. The claim that removing this one second of dollar use will bring the US down is absurd. As I said above, I do not believe that Europe buys oil from Russia in dollars. They follow a dollar pricing system, but what is stopping them from agreeing to use Euros? Nothing. The price is not a requirement of currency use. I am sure that European oil trade with Russia is effectively done in Euros right now.
You say the dollar will fall and is intrinsically worth nothing. Fine. No disagreement from me. But this has nothing to do with the IOB.
You wrap up by assuming that I am defending the US and the dollar although I explicitly said I was not. You can mix up these arguments all you want, but you are not making any point. I have admitted the dollar has weaknesses. I don't make any claim regarding what will happen to it. However, your long rant barely addressed the key point. The IOB won't change anything.
Thanks,
Rick
What puzzles me is the widespread belief by some people who post here that they can obtain solid knowledge easily, quickly and without effort. Sorry, the world does not work that way.
If you want an easy read with no graphs and no algebra but great prose and wit, get any edition of THE WORLDLY PHILOSOPHERS by Robert L. Heilbroner. From this book you'll pick up a lot of lovely tidbits you can use at cocktail parties, but more important you will get an appreciation for how economists think. Yes, good idea: Start with that book, and I'll recommend others from time to time.
Oh how true.
I see it in my work all the time.
Amazingly, it is these same people who send their partially-matured kids to college for 4 or more years --at great expense-- to learn that which they claim can be acquired with a few well-barked sound bites (e.g., what is thermodynamics?, what is physics?, what is economics?, etc.). Can't they see how foolish it is to send kids to school when it can all be internalized with a few minutes of effortless osmosis?
But then again, "common" sense is for the "common" among us.
Keep up the good fight :-)
I detest elitism.
thank you.
our country owes you gratitude.
as one who has been lucky to have a few good teachers cross my path, I am always humble to remember that I am not a self-made person but instead a product of the dedicated efforts of all those great educators.
BTW, I know how a bumblebee flies. This "problem" was solved at least twenty-five years ago.
First, I see the demand for holding US $ and US assets being sated and "eventually" creating a glut. The Central Bank of China (previously 70% US $) has talked about "diversifying". As a major holder they have no incentive to talk down the US $.
When will the break occur, when will the desire to hold US $ vs. Euros, yen, won, Swiss Francs, Aussie, Canadian & NZ $, etc. change ?
When a panic sets up IMHO (and observing other currency runs). A panic is based upon market psychology.
There is an unconscious, and not very logical link between holding dollars vs. other currencies and getting what I want (oil for example) because it is priced in US $.
Does the illogical have more impact upon the less experienced (say Central Bank of China) vs. more experienced (say Bank of England) ? Don't know but expect so.
Logically, one cannot use dollars to get what one wants from the US directly because there is not that much one wants from the US (see Balance of Trade) and there are LOTS of US $ floating around and more every day ! The US $ is more useful for 3rd country transactions.
A sudden break in oil transactions from US $ to Euros may well be the catalyst for a break down in confidence. Or it may be something else ($100 oil for example, or problems with US mortgage market or ...).
A break down that will occur in any case "sooner or later" due to our huge Balance of Trade and Payments deficits.
I'm making a preliminary bet for 60-70% correlation - when oil goes up, so is gold and the dollar tanks. With oil being the cause and the others - the effect. I think all the information we are talkng here is pretty much incorporated within the markets. Everyone is waiting it to happen, but fear (long-term thinking) has a long way to overcome greed (short-term thinking). They will try patching the situation with higher interest rates for a while, but if oil gets to 100$... clearly anything is possible.
Don't most commodities have "only one price" globally because of arbitrage? But if oil is priced in USD only, then this arbitrage can't take place and the price of oil won't vary (others things being equal) with the value of the dollar. If the dollar rises or has an inflated value, other countries have to pay more for oil, but if the dollar falls, we still have the same buying power. In fact, we can take on colossal debts, expanding credit--and therefore the money supply--indefinitely, without suffering the inflationary consequences in terms of the world's most vital commodity. If other countries behaved this way, their currencies would collapse and they would pay much more for USD for oil...
This may not be the basis of US dominance etc., but it seems like a real advantage.
Now whether a small exchange starting in a country under threat of sanctions, with tense relations with most western countries, without (I would guess) a great deal of transparency in its legal and regulatory systems, and under constant threat of attack by the US and Isreal, can really grab a substantial share of the world oil market remains an open question.
Though if the dollar is mostly supported by "dark matter", it may be the symbolism that counts anyway.
p.s. many thanks to the admins and contributors for this great site.
But why do they do it? Why not to chose other currency instead? Hasn't that to do with the expectation that dollar demand will always increase?
Isn't that connected with the uncontralable US Energy Defecit (each year consuming more, each year producing less) ?
Great to be back discussing this with you. Here's my reply to your points.
Well, they might not expect it, but in fact that is the case I believe. More transactions in dollars, more dollars will be bought. Even if I use the dollar just as a transaction currency, everyday I'll have to buy more to get the commodities I want. Remember that in the eighties we where in the 50 - 60 MDB range.
We both agree on the status of the US economy, the "Energy Deficit" is quite a good term in explaining what's going on. Although I belive IOB to be dangerous now, it wouldn't in case that Deficit didn't exist.
I have to disagree with you wen you say we must not mix the US perilous economic situation with the Oil Market. I believe that it is the Oil trading in dollars that made it so atractive to foreign countries.
Well Jack let's just wait and see. It won't happen all of a sudden in the Equinox, it'll probably go slowly at first. we'll only know for sure by the end of this year. And that is if no nukes come in to play.
I didn't say "we must not mix the US perilous economic situation with the Oil Market." I just want to look at the IOB itself and not complicate and confuse issues by throwing everything else in the discussion as Gets It did above. I have accepted (in reality or for the sake of the arguement), that the dollar faces great risks, that purchasing oil has something to do with it, and that the role of the dollar is a benefit to the US.
However, if we want to discuss the IOB, let's discuss the IOB. I have found it somewhat frustrating that nobody really addresses my points or moves the discussion forward. Usually it ends in a broadening of the arguement to say the dollar faces risks and will get weaker (which I accepted at the start) or that I am some kind of Bush-loving, neocon, American apologist because I have the temerity to question the IOB as kryptonite claim.
But let's wait and see. I have enjoyed discussing this with you and think we are both just trying to figure it all out.
At 60$/barrel, oil accounts for 27% of the total international trade denominated in dollars.
Other figures:
OPEC annual exports ~ $767 bln. Assuming conservative 10$ per barrel production costs these guys are having a net cash flow of $639 bln. A very convenient figure, almost enough to cover our trade deficit.
I would be interested in OPEC's Balance of Trade. Net $100 billion surplus would be my GUESS.
USA don't need to do anything, just enforce trade in dollars, countries of export havo no choice but to credit us unless they want to risk the well being of their own economies.
The special position of the oil in relation to other commodities is that first everyone wants it, so everyone wants dollars to get it. Second the high profitability of oil results in huge capital accumulations being easier to "recycle" e.g. by purchase of US weapons by Saudi Arabia.
One element that's missing from this thread, however, is the element of control. In particular, US control of the world's premier strategic resource and quite literally, the life blood of a nation-state's economy and MUCH MORE IMPORTANTLY... it's military.
Today, oil is traded in US currency via US owned/controlled exchanges and I submit -economics notwithstanding- it is the element of CONTROL that matters most to US interests... mess with it at your own peril.
Case in point: Iraq.
Saddam challenges status quo through conversion of oil sales to Euros.
Response: invasion.
Primary objective: oil infrastructure.
Result: foreign oil contracts dissolved, oil sales revert to US$, Chalabi (yup the same guy that brought us Curveball) heads up Iraq's oil ministry, local prices increase, production drops.
In one pincer movement, the US retains dominance of global energy trade while simultaneously securing the largest fuel depot in the world for its military.
Next up: Iran.
Iran (like Iraq) is about to challenge US oil trade dominance through the creation of a Euro-based IOB.
Are the implications economic? Perhaps.
Are the implications strategic? Most definitely!
The proposed IOB provides a most dire challenge to US dominated energy trade -if not US hegemonic interests outright- by effectively providing US adversaries a closed-loop alternative operating outside the realm of American control that (coincidentaly) just so happens to be coming online at perhaps the worst possible moment vis-a-vis the geologic restraints that we know of as... Peak Oil.
Jim Kunsler is getting more and more respect from me, although sometimes he can appear like a doomsayer he's actually a very realistic man. And he has a gift for saying what he thinks very clearly.
I guess we can all aknowledge Richard Heinberg has a pear oil drummer. Not only he mentions the website, further he talks on Bill Gates reading "Twilight in the Desert", something he most likely learnt from an open thread here at TOD.
It's just that what he says is so upsetting.
Logically you know that he is right (we can't keep the nonnegotiable life styles we have become so accustomed to). But emotionally it is very disturbing to be told we each have to give up the keys to our Paradise Lost. No more private cars and exclusive transportation, no more living in the luxurious expanses of suburbia. Very soon, we will all be Cubans.
A horrible shudder rolls through my reptilian brain stem. It chooses to deny all this quail-downing truth.
What I'd really like to see is an analysis of the price of fuel relative to salary for the US or other major countries, not just simple inflation adjusted price.
I think the reason high fuel prices aren't affecting demand is that they really aren't very high relative to income - wages have risen in real terms for a long time.
I've done this analysis for Australia which I'd like to attach the graph of if only I could work out how to do it!
But anyway, using inflation and other data from the Bureau of Statistics I've worked out the average yearly price of petrol per litre and calculated this as a proportion of average weekly wage.
It shows that prices are only at about a 10 year high but still pretty low in the scheme of things.
It's not even a significantly long upward trend yet, it will have to continue into 06/07 to do that.
When you throw in the fact that for the average household here only around 4% of total expenditure goes on fuel I think prices have to get a lot higher before people have to make any hard choices.
Prices in 1991 were 10% more than they are now using this method, and 1980 200% more, whereas simple inflation adjusted pump price is the highest it's ever been in 2006(in Australia).
A US analysis would be interesting because fuel price fluctuations in Australia are shielded to a large extent by highish fuel taxes. UK would be interesting too, where the taxes are even higher and may dampen things even more.
And on a completely different topic, US production is off to such a lacklustre start this year, they'll do well to make +100kb/day over last year, let alone the +400 I'm sure I read the EIA predicting. Did I miss discussion on this?
Not in this country they haven't.
You have to upload the image to a web site of your own, then link to it. Make sure your web host allows remote linking; many do not.
I wonder if the real wages are declining in the US because oil prices have risen so much more there?
I guess this is exactly what peak oil will look like!
There are at least three reasons that make it extremely hard to get the numbers you would like to have:
Or is your conclusion independent of any quantitative analysis whatsoever?
To my students on the first day of class I always announced: "I will never lie to you. I may confuse you, but I'll never lie." In other words, I never oversimplified, never pretended the real world was different from what I believed it to be, never claimed that what I was teaching was more than thinking exercises.
BTW, different countries define unemployment in different ways. It is exceedingly difficult to do valid comparisons.
Much empirical research in economics is of poor quality because it is very expensive and takes many years to do interesting and valid research on what is going on in the real world. Funding is much tighter now than it was in the good old days of the 1950s and early 1960s. The Vietnam war shut off funding in the social sciences abruptly, almost as if one turned a valve handle to stop the flow.
http://tonto.eia.doe.gov/oog/info/twip/twip.asp
And from there click on all the historical links, you can get all the production and import data for the last several years.
I have kept weekly totals of US crude production plus US crude imports plus US gasoline imports plus US distillate imports. I found that the combined totals for all these, for the last three months running average, are running about 800 thousand barrels per day below three-month period ending this past August. Down 800 thousand barrels per day while inventories are increasing considerably.
It takes a considerable amount of time for high prices to affect demand. People stop buying SUVs and start buying more economical models. And it takes a long while for people to adjust their driving and living habits. But high prices are now starting to affect demand quite strongly.
Consumption is down, just do the numbers like I did and it is obvious.
Also, if you go to:
http://www.eia.doe.gov/emeu/ipsr/t17.xls
and you will see that for all OECD nations demand is down down by 1.653 million barrels per day for October 2005 as compared to demand in October 2004. The EIA demand figures are always three months behind so October 2005 is the lsat month that we have any figures for.
Probably the best source of official US wage, income, inflation data is the BLS site:
http://www.bls.gov/home.htm
You'll probably have to ferret around to find the exact data you want, perhaps the best place to start is the "Get detailed statistics" page:
http://www.bls.gov/data/home.htm
The EIA site is maybe the best place to look for oil price data:
http://www.eia.doe.gov/oil_gas/petroleum/info_glance/petroleum.html
Quite right about higher oil and oil products taxation acting as a buffer when prices rise: in response to last year's hurricanes the UK petrol price rose by about 10%, the US gasoline price by about 50%.
I read the summary of the latest stats though - earnings up only 1.9% versus inflation of 3.8% over the year. Oww!
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B401CB896%2DA782%2D48CA%2D8454%2DE0D04916491 C%7D&siteid=mktw&dist=
And this is in an apparently up cycle in the US economy, and with understated inflation figures. In comment on a slightly earlier post of yours: no, this is not what peak oil will look like, you should expect earnings to reduce by maybe 10% per year for a while, if things don't get too bad.
Beyond Panic, Peak Oil Revisited.
Stop by and have a read
[/blogwhoring]
Cold Cuts 2006 Russian Oil Output:
Qatar is on a major LNG production drive to supply some 77mn tonnes to the international market by 2012 compared with the initial target of 40mn tonnes by 2020
"By 2012 we will be the largest supplier of LNG in the world. But we are aiming at total involvement in all the aspects of the LNG supply chain to ensure our customers get a secure and uninterrupted supply," al-Attiyah said.
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=73578&version=1&templa te_id=48&parent_id=28
http://www.int.iol.co.za/index.php?set_id=1&click_id=143&art_id=vn20060211110132138C184427
A German company, IFE Thin Film Technology, has a license agreement that gives IFE the right to construct and operate a manufacturing plant producing 25 MW of solar panels per annum -- half a million 50 watt modules with a typical size of 120 x 50 cm. Production is scheduled to start in the fourth quarter of 2007,
They are claiming a retail price of 10 R ($1.7) per peak watt. Not bad!
http://cooltech.iafrica.com/features/508857.htm
I know, I know, we are still doomed...but every little bit helps!
http://news.bbc.co.uk/2/hi/science/nature/4729686.stm
LMAO, ROFL
Yogi Berra said it all: It is hard to make predictions, especially about the future.
-Salvor Hardin
Pithy, but probably won't stop any thugs from taking my wallet.
The disconnect between the campaign website and listening to this interview is almost total. The first discussion topic over there was "HOW CAN WE MAKE OIL AND GAS SUPPLIES LAST LONGER, AS THE SEARCH FOR OTHER FUELS CONTINUES"? There's an analysis (pdf) by the Aspen Institute of the responses to this question. Here is a priceless quote (page 10).
Needless to say, Chevron's Robinson won't acknowledge peak oil in any way whatsoever. In fact, when the interviewer talked about the fact that their reserves additions replaced 18% of their production last year, he said that projects take time to come onstream, new projects are coming soon (like Gorgon off West Australia) for which the reserves have not been booked yet, that there will always be a sufficient number of new projects coming online as we go forward, blah, blah, blah....He pointed to the fact that although they made $14 billion in profits last year, they will be re-investing $14.6 billion for E&P and God Only Knows What Else including $300 million in alternative energy. You would think they're operating at a loss! But really, what this tells me is that any hydrocarbons they can come up with in the future will be priced so high that their ROI will increase three or four-fold on what they can find and produce. Well worth listening to (18 minutes long).
by Hon. Ron Paul of Texas" has been noted here before:
http://www.energybulletin.net/12987.html
Among other interesting facts and comments he states:
"The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.
The artificial demand for our dollar, along with our military might, places us in the unique position to "rule" the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can't last."
"The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better."
http://visz.rsoe.hu/alertmap/woalert.php?lang=eng
I recently saw a link in an unrelated area to archive.com, where you can find most (but not all the pictures) of this site through the "wayback" machine.
I'd be interested to know if the author of the site has written a book on this (I couldn't find any). Or if anyone scraped a more complete version of this site with images when it was intact.
-Ptone
http://www.abcnews.go.com/GMA/US/story?id=1640734&page=1
"Feb. 20, 2006 -- Democrats and Republicans are challenging the Bush administration's plan to give a company based in the United Arab Emirates significant control over the nation's biggest ports -- including New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia."
"Most Americans are scratching their head wondering why this company, from this region, now," Sen. Lindsey Graham, R-S.C., added.
Instead I ened up listening to this (two thumbs up) Pop!Tech 2005 presentation on "The Scandal of Prediction"
http://www.itconversations.com/shows/detail786.html
I was going to say it cuts across subjects like Peak Oil or Global Warming ... but Mr. Taleb suddenly spoke on oil prices. I won't put a spoiler, it's best in context.
Really, if you want to know what an oil price will be in a few years ... listen.
http://www.fooledbyrandomness.com/prediction.pdf
This guy, Nassim Nicholas Taleb, is an academic turned options trader. His main thesis is that randomness governs the world, particularly the financial world, to a much greater degree than is commonly appreciated, and that extreme random events are more common than thought. Supposedly his option fund has been very successful by buying out-of-the-money options, i.e. betting on longshots.
One thing I was disappointed to see that he didn't address was making predictions by the market, as compared to by the experts. I've been reading The Wisdom of Crowds by James Surowiecki, which also disparages expert predictions, but argues that you get a better answer by averaging predictions made by sufficiently diverse groups. Taleb talked about the common error of people over-estimating how likely they are to be right, but he didn't discuss how often people actually get it right. Surowiecki claims that his experiments find that crowds usually come pretty close to the right answer even for extremely exotic questions.
To tie this to oil, let's look at some option prices. I found a December 2010 $100/barrel call option selling at $5/barrel. These sell at 1000 barrel units so it costs you $5000. If oil is over $100 in 2010, your option is worth the price minus $100. So if oil were $200, your option would be worth $100/barrel, that you bought at $5/barrel, so you make 20 times your money. Your $5000 investment would be worth $100,000. Not a bad deal. This kind of money is lying on the table for Peak Oilers who have $5000 to invest and who would like to be rich.
Now, Taleb invests in these kinds of options and claims he has been very successful. This in effect claims that the market systematically underestimates volatility.
Well, in the past few years, many commodities markets have in fact begun to behave very differently than they did for the past 100 or so. While commodity prices have remained roughly constant for most of the 20th century, in the past 5 years, oil and other commodities have made or approached new highs. So I don't doubt that Taleb could have made money recently by betting on longshots.
The question is, is this a sound strategy going forward? Can we predict that the market will continue to undervalue the chance of major changes? Time after time in the past, people find successful investment strategies, write books about them, and then they promptly stop working. Either they were just lucky all along, or the market finally figured out what was going on and began pricing-in the information from the successful strategy.
Ironically, Taleb makes the point that many successful investment advisors have just gotten lucky; but he doesn't draw the obvious corollary that he may be just another example of that! Maybe he is slyly waiting for the audience to put 2 and 2 together and draw this conclusion for themselves, smug in the knowledge that few will do so.
Actually, "it" didn't become a touchstone so much as people borrowed from reviews, responses, and ideas further afield from the original work.
I enjoyed hearing directly from Taleb, and will now grab his book.
There are some very interesting ideas here regarding the nature of prediction. He says that he is pursuing prediction in certain fields (social science and financial markets). Translating and adding my interpretation, I'd say he is pressing those who presume to predict the unpredictable.
http://www.cbsnews.com/stories/2006/02/20/politics/main1331254.shtml
Redefining the laws of thermodynamics would startle me. Beyond that, I'll be nothing short of impressed. Maybe it's a machine that makes people use less energy? Oh wait, the bicycle has already been invented.
http://www.int.iol.co.za/index.php?set_id=1&click_id=143&art_id=vn20060211110132138C184427
So my question for everyone (especially for you Don Sailorman) is; can anyone recommend some reading on this subject? I'm really not sure what the topic is or where to start my reading.
shawnott,
Strange. I've been re-visiting that same question recently.
It's sort of the same as asking why, when a car accident happens, you have 5 witnesses with ten different stories (at different times).
An unfortunate defect of the human body is that we see what our mind and emotions tell us to see. At times we get forgetful and fill in the gaps with what we want. It all depends on the baggage you bring to the party at the moment.
So take Hubbert's curve. Persons A and B may agree there are a bunch of dots or curves shaped kind of like a bell on a piece of paper. After that, all bets are off. What does it mean? That very much depends on your educational background. Have you been trained in the mathematics of such curves? Have you been trained in the art of modeling system behaviors? Have you been trained in all aspects of oil exploration and production? Have you been trained in economics? Have you a religous belief that says these graphs mean nothing because everything is in the hand of God?
Do you see what I'm driving at? The blind men around the elephant each feel out a different part and interpret it's meanings from their own individual frameworks.
My thoughts so far, based on nothing other than my thinking is that our beliefs are from three things.
seems I would need to add a fourth from your statement, what we want to believe.
To touch on something else you said and what I have also been thinking about is that it all comes down to 'faith'. Peak Oil is one of hundreds or thousands of things about which I might have opinions or beliefs. But I can't be an expert in them all. I'm no where near being an engineer or geologist. So I have to make an assumption that these things I am reading are correct. Now I could over come some of those assumptions by learning more and studying. But then there will be new things I learn that I will have to accept and make assumptions that those are correct. Again I could over come those by getting a degre in that field. You see where I am going. No matter how much I learn there is always an assumption underlying them, so I have to accept alot of my beliefs with faith.
Just some random thoughts.
The logical solution is to try to divest oneself of all non-substantiated beliefs and faiths, but humans seem to have a problem with doing that.
Most people seek to see what they wish to see and seek to not see what they wish to not see.
It takes a surprising effort to attempt to see reality. And in making that effort we must always question: are we tearing back the veil or drawing our own veil over it?
Reality is only in the eyes of its perceiver, until it, surprisingly, deprives one of contact with that reality (ie. kills you). There is no soft edge to reality, it has utter distain for your perception of it.
Agric, Shawnot,
I personally no longer believe in the existence of an "ultimate truth" or a "real reality".
Instead I believe (yes, it's my own faith-based perception) in the existence of parallel-reality universes.
Well not in the sense of the above, science fiction link. Assume instead that my "universe hopping tool" is one that lets me jump from inside my brain to being able to see inside your brain, so that suddenly I see your view of history, your view of science, your view of religion, ... in short your internalized model of what's "out there".
Each of us lives in our own very private universe --what our personal brain tells us (ourselves) is "out there" and "in here".
For many people there is some overlap of their private, parallel universes. Sometimes large overlaps, sometimes hardly any. You may think of it as strong and weak entanglement in a vague, quantum physics sense.
Because of this overlap, if I make a strange noise,
say by uttering the word "oil" in the English language
and IF your ears pick up this noise, and IF your brain is paying attention enough to decode the noise, (assuming it knows English) then some unknown pattern of mental states will develop in your head. Although "I" may believe that the pattern set up in your head is the same as that set up in my head, I'm probably very wrong.
We each decode the barked noise, "oil" in a different way.
So let's assume, heaven forbid, that you were trained as an ECONOMIST and your brain detects the "oil" word --but you have no real training in chemistry and physics. A number of parallel processing programs start executing in your head:
By contrast, what pattern of mental states does the noise "oil" set up in my brain?
1. Well, I did have some training in organic chemistry, so one of the first strong signals is that of medium length hydrocarbon chains:
2. Then of course, because I am a Peak Freak: so Hubbert's Curve pops into view:
Right click & pick View Image
3. Next because I do have training in physics and how the scientific world comes together, maybe an image of fossil fuel driven industrail processes:
Right click & pick View Image
Yup, condensers, cooling towers, boilers, turbines, etc.
And now that I started letting you into my brain, you should observe, or feel or sense that I am a highly "visual" thinker whereas other people might be "sound logic" thinkers or touchy-feely thinkers. We are each very different. We "think" we all share the same universe, but no, we exist in parallel, and often very different universes.
So now do you see, feel, hear, otherwise sense, grok; why Daniel Yergin (CERA) or John Tierny (NY Times editor and worshpper of Julian Simon) may perceive Peak Oil as being silly while Matt Simmons (our Twilighter of the Arabia) may perceive it as something else? Not only are we blind men (or women)circling the elephant, but each of us brings a different set of sensing tools to the party. No wonder it is so confusing!
There are no other realities.
Perhaps you believe the glass is half full.
But in my mind that belief has to be wrong because the spaces between the electron orbitals and nuclei are massive ... err, I mean un-massive.
So you see, the so-called half-full glass is mostly empty. That's reality. (for now).
:-)
My basic point is you will believe something if your subconscious perceives believing it will benefit your short terms survival. Whether it is a lie or not doesn't matter.
My theory is that those of us who believe the "Peak Oil will have massive negative effects for our current way of life" meme generally have benefitted from taboo, dangerous, or otherwise unrecognized information or activities in the past. Richard Rainwater., as an example, was a successefull drag racer as a teenager (social capital from dangerous activity) and a successfull investor in economic disasters (financial capital from reacting to bad economic developments). Makes sense he would talk about such a socially dangerous meme in Fortune.
Best,
Matt
Best,
Matt
Then you lost me. Are you saying that risk takers are predisposed to believing in peak oil? Something else?
Actually I think that is a very valid potential area to research. It would be interesting to compare three groups:
Matt, ditto, welcome to TOD.
By your adopted Indian-sooth-sayer name (Alpha male dog, or something like that) I take it you are conscious of herd metnality and pecking order, and so forth. Not everyone groks those things at various levels of consciousness.
As for Agric's proposal (above), I'm not sure it's that easy because some people here have extensive training in geology, or intercultural dynamics or some other weird way of processing the world and some don't. Everyone percieves PO in a very different way, even if we do share access to TOD.
I can give you some starting points, though, cognitive dissonance is worth understanding:
http://www.colorado.edu/communication/meta-discourses/Theory/dissonance/
http://www.afirstlook.com/archive/cogdiss.cfm
http://www.apa.org/books/4318830s.html
Here's a relevant entry point to a wealth of info, it doesn't go too deep but gives lots of scope to explore:
http://changingminds.org/explanations/theories/a_clusters.htm
See how you go with those, come back and ask when you have questions to which you can't find answers that satisfy you.
There is an excellent and difficult literature from business administration, economics, decision theory, and the cognitive sciences. You could begin with the work of some recent Nobel prize winners in Economics, but this literature is not for the faint of heart (or the innumerate).
There is an interesting literature related to Bayesian statisitics.
Personally, I have found the literature in from the discipline of psychology to be 99.9% useless. For example, B.F. Skinner did his research on pigeons, then generalized to humans. Oy.
Perhaps the best place to start is Plato. He was very much concerned with how we SHOULD form beliefs and made a strong distinction between mere opinion (or belief) and knowledge, which he (correctly) defined as true justified belief. Few people understand this distinction. Yes, you will never go wrong by beginning with Plato, who, BTW was one of the most readable of all philosophers.
Personally I am very fond of the symbolic interactionist approach to social psychology. Briefly and with heroic oversimplification, it says that we believe what we believe because a particular belief defends and preserves our self-esteem and affirms our identity. Here I would begin with the fine books of Erving Goffman, simply because his stuff is so brilliant and easy to read.
Socrates asserted: "The unexamined life is not worth living." In other words, we should continually scrutinize our lives and our beliefs. An interesting corallary of this assertion is that the examined life IS worth living.
As I have said before, those clever Old Greeks stole most of our good ideas before we (perhaps independently) thought of them.
Thanks for your post.
I have no formal education in psychology and so had never heard of the "symbolic interactionist approach to social psychology".
Having said that, my personal experience in examining my own beliefs and those of people is that almost everyone falls into the trap of believing what they want to believe at times, with some people much more prone to this than others.
The thesis that this occurs "because a particular belief defends and preserves our self-esteem and affirms our identity" would explain what I have been seeing, both in myself and others. This is the answer to a question I've often pondered, namely "why do some people believe what they want to believe despite all facts to the contrary?"
Just having the awareness to ask myself the question "do I believe this because I want it to be true" has allowed me to let go of assorted dogmatic beliefs, especially with regard to politics and religion.
I agree that the examined life is worth living, but it can be a hard slog - reality is often stubbornly inconvenient and often unsupportive of a person's self-esteem. ;)
We create beliefs that minimize our pain. For example, two highly intelligent and educated people and I were discussing gasoline prices a couple of days ago. I said they would almost certainly go up this summer and suggested a range of $3 to $4.50, at which I was pooh-poohed to the max. Then, get this, I pointed out that last summer gasoline prices briefly touched $3 a gallon and were around $2.50 for some months. This last observation was flat-out denied! We edit our memories to reduce pain. The two people in question have a lifestyle that depends absolutely and without qualification on cheap gasoline. To remember how high prices got post Katrina and Rita was simply too painful for these two fine intelligent educated and eminently sane people.
"When ignorance is bliss, 'tis folly to be wise."
Oh, and for collective behavior, be sure to look at "Extraordinary Delusions and the Madness of Crowds," the classic by MacKay (McKay?). "The Crowd" by Gustave Le Bon is also well worth careful study.
Plato, Socrates, Aristotle all observed than when it comes to opinions, the masses are asses. Or, in their own words, translated from elegant Greek, "the opinion of the many" is seldom the "opinion of the wise." Now as to why conventional wisdom is so often wrong, that is a very very very interesting question. Socrates came up with some, but not all of the answers as to why typically we live under a reign of error.
Interestingly enough, even when signs of the inevitable discontinuity to come do occur, the herd tends to regard them as an aberration and assumes 'normality' will reassert itself if they continue as before. By the time a new trend reaches the 'point of recognition', it will be far too late for the herd to take advantage of it, or perhaps even to avoid disaster as the assumptions upon which they have based their affairs are invalidated. Cheap energy has persisted for long enough for those assumptions to be hard-wired into our modus operandi, making the inevitable adjustment far more difficult.
Be it right or wrong, the herd reinforces the beliefs of its vocal majority:
Have you heard?
We will never run out of oil.
Why?
Because most folk around here believe it to be so.
They heard it from "experts", so it must be true.
Ah yes it must be true. Pass it on.
Bah grass it must be chewed.
Bah. Bah.
What if its power could be harnessed?
What if like a judo master, we could use it to "sWay the course" rather than letting the herd "sTay the course"?
Pass it on.
SwAY THE COURSE.
http://www.thebigview.com/tao-te-ching/
It is like a 99 dimensional version of what Step Back mentioned above.
Soon we'll be discussing the Lenninist/Trotskyist theory of the necessity of forming a revolutionary vanguard because the Masses, (God bless 'em) haven't reached a sufficient level of revolutionary conciousness, and the correct appriciation of their objective class-interests.
I had an interesting discussion with my teenage daughter yesterday about Revolution contra Ghandism. We couldn't agree about whether there'd ever been a successful revolution. We sort of agreed upon the American Revolution, but again that might have been a war of national liberation! However, joking aside, and as we appear to be doing such a lot of quoting from the masters here,how about this as a motto for TOD? "It is comfort in wretchedness to have companions in woe."?
Plato was an elitist, Socrates most emphatically was not, nor were the other great Greek philosophers, from Heraclitus (a strange one) through the stoics. Recall that Epictetus was a slave.
Aristotle I find the most interesting of the ancients, because a case can be made that he invented scientific methods. (BTW, IMO "the" scientific method is bad usage; there are norms and standards in science but no one single scientific method.) Aristotle said, "Most men are, by nature, slaves." By that he was saying that few are fit for self government. Elsewhere his teacher Plato and he himself suggested that the key was education, and though they had some good ideas in this regard, I reluctantly have to fall back on the comment of my favorite 20th century philosopher (Mortimer Adler, an Aristotelian and very successful popularizar of philosophy) who told me in a small group when I raised the question of solving social problems: "We may solve the problems of war, racism, poverty, and all the others--but in a hundred thousand years we will never figure out how to raise children."
On the other hand, Adler wrote three excellent small books in which he advocated and explained a radical reform approach to education.
After the Collapse, we are going to have to take long hard looks at schooling and not repeat the mistakes of the past hundred years. BTW Adler believed that everybody could learn calculus, everybody could learn to appreciate great literature, etc. I think he was correct.
I'll cheat by packing 2 comments here.
Only a man could make such an absurd statement (and I am not impugning all men here). Plus, we will not solve war, racism etc. without lovingly raised children.
Ooops, isn't that what women used to do. My logic falters, now. Perhaps we should try men raising the children and women running the countries and businesses for a while? On second thoughts I have foreboding of circular arguments leading to potential virtual domestic violence. Let's drop it and have a beer.
There's no way men and women can have "rational" conversations on the same playing field. Their brains are so different.
Ever wonder why so few men become house husbands and do the lowly, unimportant work of "raising the kids? (OK, now I have revealed that I am a reptile head with testosterone raging through it.)
Point is that men and women "think" differently and communication between the two alien species is often difficult.
For reasons unknown, watching the battle of the sexes is fun.
BTW, Agric, I left you some links on Curitiba on the Tuesday open thread.
Jack Nicholson knew.
We can't handle the truth.
We really, underneath it all, don't want to know the truth.
We are all a bunch of irrational, programmed herd animals; and ............
we are going to die.
Sorry.
Maybe adopting a religion and believing in the here-after or the life-everlasting will help you cope. Go with God. As for me, thank God I'm an atheist.
And by the way, just because I'm an atheist does not mean I don't believe in God. I believe God truly does exist. Go figure that out.
"What Do We Know"
http://www.itconversations.com/shows/detail787.html
See also "twin studies" that indicate that what we believe about some political issues is genetically influcenced. FWIW, my current thinkig (belief?) is that society/democracy is driven by a "distribution" of beliefs, but that those beliefs may not be as flexible or as cognitively derived as we believed a few decades ago.
(Note the comments by the Russian Minister of Industry and Energy that, in the absence of new incentives for frontier E&P projects, Russia could be facing "a real collapse in oil production." Nice to know that someone shares my concerns about Russian oil production.)
http://www.russiaprofile.org/politics/2006/2/6/3211.wbp
February 6, 2006
The Need for Energy Dialogue
Interview by Thomas Rymer
Russia Profile
Minister of Industry and Energy Viktor Khristenko Talks to Russia Profile
Excerpt (comments by Kristenko):
V.K. The differentiated rates of the mineral resources tax have been discussed for quite some time now. The Industry and Energy Ministry is actively involved in this process. The objective is to create a transparent differentiation mechanism for the tax that would rule out varying applications, without leading to large losses for the budget and at the same time encouraging the development of new deposits.
Our position is that we should resolve this issue by introducing a tax holiday period of 5-7 years for new deposits, where industrial production has not yet begun.
Above all, zero-tax rate would give companies an incentive to begin high-risk development in eastern Siberia, the Far East and offshore. The Industry and Energy Ministry also proposes introducing tax breaks for exhausted deposits. Various threshold levels of depletion are currently being examined.
One important point is that the longer we delay making this decision, the harder it will be to feel the effectiveness of the measure taken: the structure of the country's reserves will continue to get worse and Russia could end up facing a real collapse in oil production. At the same time, we need to remember that it will be quite some time before any mechanism aimed at encouraging the growth of reserves will have a visible effect. This is another argument in favor of taking action as quickly as possible. I think that we will reach concrete results this year.
The CV (Conventional Wisdom) crowd has a different opinion.
However, as Matt Simmons has pointed out, the 10 largest oil companies working the North Sea were dead wrong regarding the North Sea peak (they were all predicting a peak around 2010). The HL method was dead right regarding the North Sea, and 10 major oil companies using the best available data and best available engineers, were dead wrong.
In Kuwait, the recently leaked internal report is supported by Stuart's HL analysis, and both of these contradict the CIA's estimate of proven Kuwait reserves.
If the CV crowd can be that wrong regarding what are--compared to Russia--easy regions to evaluate, why can't they be wrong about Russia?
In 1989, HL would not have been within 96% of actual.
In 1991, HL would not have been within 96% of actual.
In 1993, HL would not have been within 96% of actual.
Given the wide delta in y-o-y declines predicted by HL and y-o-y observed for the last two decades, there is no compelling reason to think that suddenly y-o-y figures predicted by HL and actual are suddenly going to be closely in sync.
HL has been wrong, extremely wrong in some years, for y-o-y figures and now, suddenly, you are confident that they will be in close sync ?
Why ?